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Accounting Standard AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates
Amendments to AASB 108Amendments to AASB 108
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Amendments to AASB 108
| Paragraphs 5, 32, 34, 38 and 48 and the heading above paragraph 32 are amended. Paragraphs 32A–32B, 34A and 54I and the headings above paragraphs 34 and 36 are added. The heading above paragraph 39 is amended to be a sub-heading of the heading added above paragraph 34. Deleted text is struck through and new text is underlined. |
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Definitions
5 The following terms are used in this Standard with the meanings specified:
Accounting estimates are monetary amounts in financial statements that are subject to measurement uncertainty.
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A change in accounting estimate is an adjustment of the carrying amount of an asset or a liability, or the amount of the periodic consumption of an asset, that results from the assessment of the present status of, and expected future benefits and obligations associated with, assets and liabilities. Changes in accounting estimates result from new information or new developments and, accordingly, are not corrections of errors.
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Accounting Changes in accounting estimates
32 An accounting policy may require items in financial statements to be measured in a way that involves measurement uncertainty – that is, the accounting policy may require such items to be measured at monetary amounts that cannot be observed directly and must instead be estimated. In such a case, an entity develops an accounting estimate to achieve the objective set out by the accounting policy. As a result of the uncertainties inherent in business activities, many items in financial statements cannot be measured with precision but can only be estimated. Developing accounting estimates involves the use of judgements or assumptions Estimation involves judgements based on the latest available, reliable information. Examples of accounting estimates include For example, estimates may be required of:
(a) a loss allowance for expected credit losses, applying AASB 9 Financial Instruments bad debts;
(b) the net realisable value of an item of inventory, applying AASB 102 Inventories inventory obsolescence;
(c) the fair value of an asset or liability, applying AASB 13 Fair Value Measurement financial assets or financial liabilities;
(d) the depreciation expense for an item of property, plant and equipment, applying AASB 116 the useful lives of, or expected pattern of consumption of the future economic benefits embodied in, depreciable assets; and
(e) a provision for warranty obligations, applying AASB 137 Provisions, Contingent Liabilities and Contingent Assets.
32A An entity uses measurement techniques and inputs to develop an accounting estimate. Measurement techniques include estimation techniques (for example, techniques used to measure a loss allowance for expected credit losses applying AASB 9) and valuation techniques (for example, techniques used to measure the fair value of an asset or liability applying AASB 13).
32B The term ‘estimate’ in Australian Accounting Standards sometimes refers to an estimate that is not an accounting estimate as defined in this Standard. For example, it sometimes refers to an input used in developing accounting estimates.
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